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Advancement Granted For Fees Incurred in Defamation Action

By Francis G. X. Pileggi, Esq.

In Duthie v. CorSolutions Medical, Inc., 2008 WL 4173850 (Sept. 10, 2008), the Delaware Chancery Court addressed three issues in  a case in which it had previously ordered advancement.

1. Are the plaintiffs entitled to advancement of fees incurred in affirmatively asserting defamation claims regarding statements made in connection with the litigation about which the initial advancement suit was filed?
2. Were plaintiffs entitled to fees for securing parallel counsel to "get up to speed on the file" in case of a potential conflict (that never materialized)?
3. Are various fees for which advancement has been sought reasonable?

The court's answer to the first and second question is yes. As to the third question, the court set up a procedure for a Special Master to be appointed if the parties could not resolve the amount of fees to be paid--after each counsel submitted an affidavit about the reasonableness of their fees.

Here are what I regard as a few key points of the decision corresponding to the above issues:

• Although advancement is usually raised in the context of defending claims, there are instances where a defensive strategy appropriately includes asserting affirmative claims, especially where, as here, the certificate of incorporation broadly allows for it. (citing Citadel Holding Corp.  v. Roven, 603 A.2d 818, 824 (Del. 1992)). 

• Having new counsel ready to "hit the ground running" in the event of a potential conflict (even if it did not materialize) was prudent and it was reasonable to incur such fees--thus, they also are included with the advancement right.

• Money quote, regarding dispute over fees: "Advancement  is not the proper  stage for a detailed analytical review of the fees, whether in terms of the strategy involved or the staffing and time committed. Typically, a good faith certification from counsel  should  suffice."

Full post as published by Delaware Corporate and Commercial Litigation Blog on September 14, 2008 (boomark / email).